Twenty Directives Land to Administer Taxes

The process also includes collecting circulars and embrace them as a directive

The Ministry of Finance & Economic Cooperation (MoFEC) along with the Ethiopian Revenues & Customs Authority (ERCA) started drafting and amending no less than 20 directives which could make the process of tax exemption strict.

A group of experts divided into two subgroups from ERCA and MoFEC have dwelled in Bishoftu town for a month to draft the directives which are based on the Income Tax Proclamation, amended in 2016 and Tax administration proclamations which were drafted for the first time the same year.

Though the proclamations were enacted two years ago, they were not followed by directives. They were in use with circulars and old directives issued before the issuance of the proclamations.

“Though the process is late, the directives will clarify the ambiguity in the proclamations,” said Mulay Woldu director of the tax policy directorate at MoFEC.

The process also includes collecting circulars and embrace them as a directive, according to sources close to the matter. Reviewing penalty suspension, an extension of tax payment duration, use of vouchers, suspension of the administrative decisions under the tax administration proclamation are also the tasks of the team.

Management, merger and lease contracts will also be included in the directive which is devised to manage clearances.

Tax holiday and exemption administration are also the major areas which will get new directives and have their old directive amended. Ethiopian Investment Commission (EIC) and Ministry of Mines, Petroleum & Natural Gases (MoMPNG) are delegated by MoFEC to administer tax exemptions.

The two institutions will be subjected to stringent follow up by MoFEC over the exemption they granted for companies, according to same sources.

In the first half of the current fiscal year, ERCA has exempted about a 34 billion Br duty from items imported into the country. The amount is literally 37pc of the total tax that was collected in the same period.

A recent report by the Federal Ethics & Anti-Corruption Commission stated that MoMPNG and EIC are not managing the duty-free incentives properly as it is subjected to maladministration and corruption. International finance institutions such as the World Bank (WB) have been pressuring the government to review its tax holidays and exemptions systems.

Tax to the GDP ratio of Ethiopia stands at 12.4pc last year downs from 13.3pc the preceding year, which is far lower than 18pc of the Sub Sahara ratio.

Yohannes W.Gebriel, a legal practitioner with a vast experience of tax law and commercial code, applauds the moves of the government in drafting and amending the directives.

“Outdated directives have been creating inconsistencies and contradictions,” said Yohannes, citing the case of tax appeal time which was stated as 10 days in the directive while the proclamation limits it in 21 days.

However, Yohannes recommends that the drafting process has to be inclusive.

“The business community or the chamber of commerce need to take part in the process,” he said. “At least zero drafts should be available to the stakeholder.”